The First Trust Cloud Computing ETF (SKYY – Free Report) was launched on 05/27/2011, and is a passively managed exchange traded fund designed to offer broad exposure to the Technology – Cloud Computing segment of the equity market.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology – Cloud Computing is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 9, placing it in the bottom 44%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $3.11 billion, making it one of the largest ETFs attempting to match the performance of the Technology – Cloud Computing segment of the equity market. SKYY seeks to match the performance of the ISE Cloud Computing Index before fees and expenses.
The ISE Cloud Computing Index is a modified market capitalization weighted index designed to track the performance of companies actively involved in the cloud computing industry.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.31%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector–about 89.40% of the portfolio. Consumer Discretionary and Telecom rounded out the top three.
Looking at individual holdings, Alibaba Group Holding Limited (adr) (BABA – Free Report) accounts for about 4.03% of total assets, followed by Pure Storage, Inc. (class A) (PSTG – Free Report) and Mongodb, Inc. (MDB – Free Report).
The top 10 holdings account for about 34.14% of total assets under management.
Performance and Risk
The ETF has lost about -38.30% so far this year and is down about -40.15% in the last one year (as of 09/22/2022). In that past 52-week period, it has traded between $61.99 and $119.56.
The ETF has a beta of 1.04 and standard deviation of 32.91% for the trailing three-year period, making it a medium risk choice in the space. With about 71 holdings, it effectively diversifies company-specific risk.
First Trust Cloud Computing ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, SKYY is an excellent option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Global X Cloud Computing ETF (CLOU – Free Report) tracks INDXX GLOBAL CLOUD COMPUTING INDEX and the WisdomTree Cloud Computing ETF (WCLD – Free Report) tracks BVP NASDAQ EMERGING CLOUD INDEX. Global X Cloud Computing ETF has $625.05 million in assets, WisdomTree Cloud Computing ETF has $658.42 million. CLOU has an expense ratio of 0.68% and WCLD charges 0.45%.
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